Southeast Asia Manufacturing For Boeing Aircraft Booms

The supply of parts, assemblies and services for Boeing products has created valuable new economic opportunities in Southeast Asia in recent years. In fact, since 2009, Boeing suppliers have established aerospace manufacturing centers for commercial aircraft production in five Southeast Asia countries: Vietnam, Malaysia, Indonesia, Thailand and Singapore. Meanwhile, Boeing suppliers in other countries, including Australia and Malaysia, have added new commercial or defense manufacturing capacity to their portfolios.

In a pre-Singapore Airshow interview, Boeing Asia president Skip Boyce shared with AIN a sort of bird’s-eye perspective on a region whose industrial base has grown to include no fewer than 50 suppliers to the Boeing Company. Employed by Boeing for four years and as a foreign-service officer with the U.S. State Department for 31, Boyce knows the region well. Far more diverse in many ways than Western Europe or North America, Southeast Asia doesn’t lend itself to easy classification.

“As a region, [Southeast Asia] is hardly homogenous,” stressed Boyce. “It’s a region where 10 different countries possess 10 strikingly different cultures and different histories…so the challenge in Southeast Asia is to keep a handle on a lot of different countries and markets.”

Of course, coordinating the activities of the various suppliers in the fast-growing region, too, presents its challenges, as well as opportunities. Of the 50 suppliers in Southeast Asia with which Boeing now does business, 11 have begun doing new work for the OEM over the past two or three years.

Boyce divides the region into three “tiers” or categories of technological capability and experience, the first residing in Australia, particularly in the military realm.

In the second category Boyce placed Singapore and Malaysia, which he described a “relatively advanced” economies compared with the rest of the region and where Boeing maintains ties with companies such as Spirit Malaysia, which last November announced would assemble the fixed leading edge for the 787 Dreamliner.

Boeing also maintains a joint venture in Malaysia with Hexel called Asian Composites Manufacturing (ACM). Located in the remote enclave of Alor Setar, ACM opened in 1998 and now produces primarily composite wing parts for virtually the entire range of Boeing products. Increasingly moving “up the value chain,” ACM’s activities represent an example of what Boeing wants to project as a serious contribution to the region’s development rather than just another opportunity to exploit cheap labor. “That means hiring more people, training them and bringing high-tech [manufacturing] into a sort of very little area of Malaysia,” said Boyce.

Finally, some of what Boyce characterized as “third-tier” countries, such as the Philippines, Indonesia and Thailand, have proved the most interesting in terms of their growing levels of economic activity and their appetite for more business. “We have either successful sales or very important campaigns in all the countries I just mentioned,” said Boyce. “Obviously, to the extent we can, we want to be responsive to approaches by governments and airlines as far as tech transfer and the kinds of things we can do in industrial participation, etcetera…and also perhaps identifying areas ourselves.”

Meanwhile, Boeing continuously attempts to identify areas where it can serve as a good corporate citizen. “We get a lot of approaches from Southeast Asian governments to support their aerospace manufacturing growth,” said Boyce. “They’re very interested in direct foreign investment…setting up industrial areas, new factories. They’ve even invested resources in education and we’ve often supported that as well through our own investments in things like universities and secondary schools to help develop the capable labor force needed to go in that direction.”

Boyce mentioned “over 20” different projects in Vietnam alone, some in rural areas in dire need of the kind of modern education infrastructure Boeing’s resources can bring. All told, in 2011 alone, Boeing spent $457,000 on so-called corporate social responsibility activities in Southeast Asia.

Of course, like any company, Boeing doesn’t invest in developing regions out of pure altruism. For example, educating a young and dynamic population for careers in aerospace translates into a deeper pool of talent in a region whose labor costs now compete “very attractively” with China and India, said Boyce.

Yet another attractive, seemingly inherent characteristic of Southeast Asia centers on its economic resilience. As a whole, Southeast Asia has rebounded from financial crises more effectively than either the U.S. or Europe, for example. “If you look back over the last 20 or 30 years, the trend line has been consistently up, and given the nature of our production capacity requirements and capability requirements, Southeast Asia by and large [consists of] very important and exciting countries,” concluded Boyce.